Which of the following is a limitation in using profitability as the sole measure of performance?
A)Profit is linked to diminishing returns to scale and is a misrepresentation of true performance.
B)Profit is a short-term measure and can be manipulated by taking actions that may prove dysfunctional in the longer term.
C)Profit produces externalities,which invariably have a negative effect on the environment.
D)Profits cannot account for the network effects that are generated by multiple users in diverse locations.

Question

Quizplus · Accepted Answer

Profitability as the sole measure of performance can lead to short-term decision making that may prove to be dysfunctional in the longer term. It is important to consider other factors such as long-term sustainability and social responsibility. The other options are not directly relevant to the limitations of profitability as a measure of performance.

Which of the Following Is a Limitation in Using Profitability